Helping With the Costs of Raising a Family
The federal government has benefit programs that provide financial assistance to help people with the costs of raising a family. The programs include:
- Universal Child Care Benefit
- Canada Child Tax Benefit
- Registered Disability Savings Plan
- Tax-Free Savings Account
These programs are available to Canadians, permanent residents and others who qualify.
Universal Child Care Benefit
This program helps offset the costs of daycare for younger children. You are eligible to receive $100 per month per child for whom you are the primary caregiver. The $100 is an actual payment to you, as opposed to a tax credit.
Regardless of whether you or your spouse receives the payment, these payments are taxable in the hands of the lower-income spouse or common-law partner. To be eligible, you and your spouse or common-law partner must be living together at the end of the year.
What if I am separated?
Separated parents are entitled to a one-half entitlement of the universal child care benefit (UCCB) if the child splits their time rather equally between the two spouses.
What if I am single?
If you are single, you can receive the $100 per month benefit. However, you can elect to include the benefit in the child’s income, thereby reducing income taxes on the benefit.
What impact will the universal child care benefit have on me receiving other benefits?
Your UCCB benefits:
- are not taken into account when calculating income-tested benefits received through the federal tax system, such as the disability tax credit or the GST/HST credit
- do not reduce employment insurance benefits
- do not affect the amount of child care expenses eligible for a tax deduction
How do I enroll?
You will need to submit a completed Canada Child Tax Benefit application, which is available:
- from CRA’s website
- by calling 1-800-387-1193
- at the local Canada Revenue Agency office or Service Canada centre
Canada Child Tax Benefit
This benefit is a tax-free monthly payment made to parents of children under 18 years of age whose net family income falls below certain limits. According to CRA’s website, the approximate family income levels above which you will not be eligible for the Canada Child Tax Benefit (CCTB) are:
- one child – $116,253
- two children – $116,253
- three children – $154,928
How is it calculated?
CCTB is calculated once a year by looking at the number and age of children and the income level of the family. It is paid on a monthly basis. The amounts are adjusted annually to reflect cost-of-living adjustments.
It is very important that the parents file a tax return each year even if there is no income to report so that benefits will not be interrupted.
Who is the benefit paid to?
The benefit is paid to the person who the child lives with and who is responsible for the child’s care and education.
What if I share custody of a child?
In that case, each parent is entitled to 50% of the CCTB.
How do I enroll?
You will need to submit a completed CCTB application, which is available:
- from CRA’s website
- by calling 1-800-387-1193
- at the local Canada Revenue Agency (CRA) office or Service Canada centre
When should I enroll?
You should enroll when the child is born or they become a resident of Canada. This is because CRA can only make retroactive payments for up to 11 months from the time it receives the application.
Registered Disability Savings Plan
This is a long-term savings plan to help Canadians with disabilities and their families save for the future.
If you or your children qualify for the disability tax credit, you may open a registered disability savings plan (RDSP).
What are the benefits of starting a RDSP?
The benefits are that you may be eligible to receive the Canada Disability Savings Grant (CDSG) and/or Canada Disability Savings Bond (CDSB). As well, the investment income earned from an RDSP, as well as any CDSG and CDSB contributions, can grow tax-free until they are withdrawn.
What are the Canada Disability Savings Grant and Canada Disability Savings Bond?
The Canada Disability Savings Grant is a payment made by the federal government to help Canadians with severe and prolonged disabilities. It is a limited matching grant paid into an RDSP.
While also paid into an RDSP, the Canada Disability Savings Bond is not a matching grant. Whether you are eligible for it depends on your family’s net income.
What are the contribution limits?
RDSPs are not subject to annual contribution limits, but they do have a $200,000 lifetime limit. You can contribute to the RDSP until the end of the beneficiary’s 59th year.
If I qualify for CDSG and CDSB payments, how much will they be?
Canada Disability Savings Grants match contributions at 100%, 200% and 300% levels, up to a maximum of $3,500 per year. This depends on the contribution you make, as well as your family’s net income. Canada Disability Savings Grants have a $70,000 lifetime limit and can only be paid on contributions made to the Registered Disability Savings Plan of a beneficiary who is not over the age of 49 by the end of the year.
For Canada Disability Savings Bonds, if your family has a net income of below $43,561 for 2013, you may qualify for up to $1,000 for the year. There is a $20,000 lifetime limit on CDSB payments.
Can I transfer the investment income from a registered education savings plan into my RDSP tax-free?
Yes, if the beneficiary is the same under both plans.
Tax-Free Savings Account
A tax-free savings account (TFSA) provides an alternative to your current investment holdings.
How does a TFSA work?
With a TFSA, you’ve already paid tax on the money before you put it in the TFSA because the contributions are not tax deductible. Your money can generally be invested in the same things as a Registered Retirement Savings Plan, such as mutual funds, stocks, cash and guaranteed investment certificates.
What are the benefits of a TFSA?
- Your contributions are not tax deductible.
- Investment earnings made within the TFSA are not taxable.
- Withdrawals can be made anytime on a tax-free basis.
- Money withdrawn from a TFSA can be returned to the account at a future date.
- Unused annual contribution limits can be used in future years.
Can a TFSA be used as part of an income splitting strategy?
Yes. If you are looking to give money to your spouse or common-law partner to contribute to a TFSA, this will not be subject to the rules governing income splitting. A TFSA is an effective way of transferring money to your lower income spouse or partner.
What are the requirements for contributing to a TFSA?
You must be 18 and have a valid Social Insurance Number (SIN).
How much can I contribute to a TFSA?
If you were 18 years of age in 2009, $5,000 annually was added to your TFSA contribution room for each year until 2012. An additional $5,500 was added to your contribution room for 2013 and 2014. This limit will be indexed for future years.
If you were 18 years of age in 2009 and have not yet made a contribution to your TFSA, in 2014, you could contribute $31,000.